This article will help answer that question.
The price floor is a policy that sets the price of an item above market equilibrium.
Which can cause unintended consequences.
In this article, we’ll explore what happens when there’s a price floor.
Why it might not be the best idea to enact one in your business?
The unintended consequence of a price floor creates two groups:
Consumers will either overpay if they buy from the producer with the artificially high prices OR they’ll go elsewhere to find what they need at lower costs (i.e., black markets).
With these consequences, you might want to think twice before instituting such a scheme so your business doesn’t end up on its head!